Three essays about monetary policy in China
Abstract
The thesis focuses on three aspects of China's monetary policy since the 1980s.
Chapter 1 examines the monetary policy actions of the central bank in China. A
new policy stance index incorporating a range of di erent monetary policy instruments
is developed and examined. The empirical results suggest that the PBC is
informally targeting in
ation although no explicit target has been announced. Chapter
2 focuses on China's monetary conditions and aggregate demand in terms of the
monetary conditions index (MCI). Di erent transmission channels are considered
through which monetary conditions might in
uence aggregate demand. The empirical
tests show that the MCIs contain useful information about future output growth
and in
ation in China over the short and medium term. Chapter 3 examines the scal
challenges to the monetary authority's control over the price level in China. The
empirical result suggests a scal dominance regime. When a pegged exchange rate
regime is considered, it is argued that in the presence of large capital in
ows and
strong central bank interventions, the monetary authority can generate seigniorage
without worrying about the foreign exchange reserves to decrease.